Spain’s Economic Boom Masks Housing Crisis and Inflation as Sánchez Calls Snap Elections

Pedro Sánchez, President of the Spanish Government, has called snap elections for 29 November, hoping that strong economic figures will overcome a widespread feeling that macro-level growth has not translated into improvements in Spaniards’ quality of life. The decision comes after his government failed to ratify two decrees aimed at tackling the housing crisis, lacking support from partners in Congress. Sánchez, who has governed Spain since June 2018, now faces a campaign where economic success and social discontent collide.

Growth Outpaces Euro Area, but Productivity Lags

Spain’s GDP grew by 2.8% in 2025, and the European Commission forecasts 2.4% growth for 2026. Since the pandemic, Spain has grown faster than the main euro area economies. However, the Commission attributes part of this growth to a sharp population increase driven by migration flows, and notes that weak labour productivity means aggregate growth is not reflected to the same extent in per capita income. Hourly productivity has improved since 2019, but productivity per employee and per full-time worker remains virtually flat.

Immigration has been one of the engines of the Spanish labour market. Employment grew 2.6% in 2025, with jobs filled by people born abroad accounting for 7.9% of posts created that year. Yet the labour market remains strongly seasonal: in August, unemployment rose by 44,419 people to 2,355,918, the lowest figure for that month since 2007, and in September the jobless total increased again by 23,587 people, also a low for that month since 2007.

Tourism Boom and Low-Productivity Jobs

The main pillar of Spanish growth is the services sector, especially exports of services and tourism. Spain received 58.1 million international tourists between January and July 2026, an unprecedented figure and 4.6% more than a year earlier. Tourist spending rose 7.8% to a record 82.054 billion euros, according to data from Frontur and Egatur published by the National Statistics Institute (INE). The Commission notes that the increase in exported services helped widen the current account surplus and improve the international investment position.

However, the Commission warns that a significant share of activity is concentrated in sectors with relatively low productivity, such as agriculture. More than 82% of jobs created are in low-productivity activities, limiting the scope for wage growth. In September, annual inflation in Spain stood at 5%, above the euro area average of 3.8% and only behind Lithuania, Bulgaria, Cyprus, Luxembourg, and Greece. The INE attributed the spike mainly to rising fuel prices and the behaviour of package holidays.

Housing Crisis Undermines Quality of Life

Housing sums up the imbalance between economic growth and quality of life. Spain faces a serious mismatch between supply and demand, for buying and renting, especially in large cities and tourist areas. The Commission’s country report states: “The severe rate of housing deprivation increased, which indicates poor living conditions.” Social housing barely accounts for between 1.5% and 1.7% of total stock, compared with an EU average between 6% and 7%. Prices have been rising steadily since 2014 and accelerated in recent years, making labour mobility more difficult. Protests over the housing crisis have gripped the country for weeks. Sánchez’s economic balance sheet has two sides: one of growth, job creation, and benefiting from foreign workers and tourism; the other weighed down by low productivity, loss of purchasing power, and difficulty accessing housing.